Grounded for Takeoff... The Future for Legacy Airlines

ST. LOUIS, July 6 /PRNewswire-USNewswire/ -- The following is commentary by
San Antonio entrepreneur and Webster University Global MBA Student R. Shelton
Moynahan:

On the brink of a decade of stagnant growth, little to no profitability,
bankruptcy pandemics, highly ineffective mergers, and some of the poorest-
ranked customer service, what is next for legacy airlines? How do they
weather this never-ending storm?

From the time I was a child, I was intrigued by the over-complexity associated
with the airline industry -- the routes, planes, bags, people, hubs and
spokes; it was all fascinating. What I didn't know was that this fascination
would become not only my profession but also my inspiration. As an
entrepreneur in the travel trade, self-proclaimed airline junkie, and global
MBA student; I have firsthand knowledge about the decisions inside the U.S.
airline market and their associated repercussions. I believe that I have the
skills and abilities to be part of the solution to the many problems plaguing
the industry; I am ready for the challenge!

For legacy carriers to compete in the modern airline industry they must employ
a level of innovation never used before. Airlines must embrace the potential
of the incoming workforce. We are young, willing to take chances and push the
envelope on what being an airline means. It's not about cutting costs and
charging for bags, drinks or phone reservations; it's about creating something
of far greater value and charging for it. Competing on price alone is not
enough. You have to be outstanding...bring something else to the table.

Legacy airlines are learning they cannot successfully compete with financially
superior LCCs, one of the most complex problems plaguing the industry today.

America West and U.S. Airways merged in 2005, becoming one of the
lowest-ranked carriers in the areas of customer service, baggage handling and
profitability. The consolidation of two unrelated airlines, with their
conflicting cost structures, cultures, histories and operational procedures,
just didn't work; full synergy may never be achieved. The outcome of this
merger halted talk of further consolidations, leaving no other avenue but
bankruptcy for United (2002), Northwest (2005), and Delta (2005).

In 2008, the fuel for consolidation was ignited once more when Delta was given
the green light to merge with Northwest, creating the world's largest airline.
Officially united in October 2008, Delta/Northwest learned the most valuable
lesson from their predecessors...Nothing happens without the labor unions. If
the new Delta achieves synergies and increases efficiency, we may see a trend
toward further consolidation. Conversely, there is a lack of beneficial merger
partners and the most recent opinions coming from the new administration
regarding Continental's intent to join the Star Alliance are less than
encouraging.

Large legacy carriers are riddled with inefficiency, the slow-moving pandemic
that cripples financial position, operational flexibility and innovation over
time. The airline industry has to face these problems full force, find the
people who share in a passion for innovation and change, the people who will
do the right thing, and give them the power to do it. It's not going to be a
quick or painless change, but if the market continues as it is now, there are
rough skies ahead.

Legacy carriers have more than 50 years of experience, infrastructure and
exposure; today's challenges will require all of that experience to prevail.
Airlines need a renaissance, a time to redefine their very existence. Now is
the time to stop fighting a war on price that cannot be won and develop a new
strategy that provides sustainable, long-term, competitive advantages.

It has been proven that younger carriers with significantly lower labor costs,
newer aircraft, fewer top-level executives, flatter organization, and a
generally lower cost structure have an advantage over international long-haul
carriers in the domestic market. Is there a plateau at which further expansion
does not have added benefit? I believe there is. The long-haul airline
industry suffers from 'dis-economies' of scale: continually high unionized
wages, loss of effective union rules, and aging fleets that are too
inefficient to compete in a cutthroat domestic market. Profitability through
specialization is key to long-term success for the legacy carriers.

Maintaining two separate cost structures is one of the only options to remain
profitable and competitive in the domestic segment. Delta and United failed to
do this with their LCC subsidiaries Song and TED. Both attempts failed because
LCC models are radically different and management was not able to operate as
such. Legacy airlines will have to either outsource their domestic needs,
reaping the benefit of efficient operations or reinvent their domestic
structure while still providing their signature international service.

If airlines choose to operate in the markets where they are most capable they
can achieve a competitive advantage through specialization. By spinning off,
developing, or acquiring LCC's, airlines will be in a position to leverage
their strengths and help ensure a more efficient and effective organization in
the future. With consolidation and specialization, airlines will be better
positioned to service the customer, while accomplishing corporate goals and
more effectively serving their stakeholders.

Positioning will only allow for the potential for future success, not solve
the problems plaguing the industry. Legacy carriers must seize the
opportunities presented, innovate their way through the challenges and
revolutionize this antiquated industry. Tomorrow's problems cannot be solved
with yesterday's solutions. The airlines that embrace change and innovation
first will reap the greatest rewards. I look forward to being that catalyst
for change in the coming months, and contributing the "redefinition" of the
industry.

If we have learned anything from the path to destruction followed by Detroit's
big three, proactive change is the only way to succeed in capital intensive,
unionized legacy industries. The market will eliminate inefficiencies, those
who embrace change now, and innovate ahead of the market, will succeed.

[Editor: Theresa M. Maier]

An ambitious young entrepreneur from San Antonio, Texas, Shelton Moynahan will
graduate from Webster University with a globally-focused MBA in July 2009.

With its home campus in St. Louis, Webster University (www.webster.edu) is a
worldwide institution committed to delivering high-quality learning
experiences that transform students for global citizenship and individual
excellence. Founded in 1915, Webster offers undergraduate and graduate degree
programs through five schools and colleges, and a global network of more than
100 campuses. Its 20,000-plus student population represents almost 150
nationalities. The University's core values include excellence in teaching,
joining theory and practice, small class sizes, and educating students to be
lifelong independent learners, fully prepared to participate in an
increasingly international society.

Since opening its first campus overseas in Geneva in 1978, Webster has become
a recognized leader and innovator in global education, with an international
presence that now includes campuses in London; Vienna; Amsterdam and Leiden,
the Netherlands; Shanghai, Shenzhen and Chengdu, China; and Bangkok and
Cha-am, Thailand. Webster also has educational partnerships with universities
in Mexico and Japan.

SOURCE Webster University -- Saint Louis Campus

Susan Kerth, Media Relations Officer, +1-314-246-8232 (office),
+1-314-220-9130 (cell), susankerth14@webster.edu